"That should also reduce out-of-stocks on the dot come side as well," Gilmore noted.

Don't Let E-Fulfillment End Up Like a Monte Python Movie

David Schneider agrees that you have to start at some very basic questions.

"The idea of multi-channel distribution under a single roof is like the Holy Grail that King Arthur and his knights searched for," Schneider told SCDigest. "Hopefully along the way, we logisticians don't end up with the same ending as the Monty Python movie."

He said you have to start with clearly defining the goal of the e-fulfillment strategy.

"If you fail to ask and answer that question with sufficient vigor, you will not find your e-fulfillment grail," Schneider says. "You have to look at the idea of multi-channel distribution under one roof from a variety of viewpoints and outcomes. In the rush to exploit dot com, that basic and obvious question is often not really answered."

Schneider noted that the question of where and how to do e-fulfillment can vary even within retail, depending on the specific sector of the retail industry.

For example, Schneider notes that in the many retail sectors in which the distribution model is "push," (meaning the merchandise assortment is pushed out into the store and then sold, versus models say that are based on store orders), the main flow of the distribution center is usually a cross dock design, making it hard to mix e-commerce into the same operations.

"Most of the apparel sector, for example uses the push model, with limited store replenishment," Schneider say. "The space used for replenishment, which is usually based on piece picking, is what could support the e-commerce area," making dot com and store replenishment often a good fit.

Schneider also says it is critical to assess whether how much it is possible to optimize picking and packing for e-fulfillment.

"Must you pick the order as soon as it comes in, or can it marinate for a period of time until you get 30 to 50 pick assignments in an aisle?" Schneider says he encourages clients to investigate. "If you can hold the orders, then you can batch pick the aisle, picking multiple items into a tote. If the orders don't build a good work plan, marry aisle assignments together until they do. Dispatch the totes to a packing station where the station is designed for the packer to scan an item and then pack it. This method will work for the majority of e-commerce orders where the order is a single line item" - and significantly reduce total picking and packing costs, Schneider says.

Relative to Gilmore's comments, Schneider thinks it is important to note that just because a company decided to outsource e-fulfillment doesn't mean there may be great challenges keeping up if demand soars. Use of a 3PL is not a panacea for e-commerce growth pains. A fast growing e-commerce channel could easily outstrip a given 3PL's capability to deliver.

In the end though, it seems Schneider thinks looking to outsource e-fulfillment is often the smart one.

"Often we logisticians get caught up in the minutia of the operations. The constant focus of finding that next penny to save in the operations," Schneider says. "That quest for the next few points of cost reduction blinds us to the overall goal of businesses: make more money, today, and tomorrow. In our effort to cut costs we make the inventory flow slower, building up excess, or worse, duplicating inventory. Duplicating inventories because we can't get our systems to do a better job managing them is borderline stupidity. The mindset that you have to run your own distribution may prove to be a financial millstone in e-commerce."

How do you think about the question of combining e-commerce and traditional distribution in the same facility? What are the decision drivers? Less us know your thoughts at the Feedback section below.